The biggest office sale in Cleveland in the first quarter of the year came relatively late: Oaktree Capital Management’s $51.5 million purchase of PNC’s operations at 4100 W. 150th St. But while that transaction grabbed most of the headlines, it wasn’t the only big office sale of the first quarter here.
In the suburbs, Time Equities purchased PNC’s property at 23000 Millcreek Blvd. in Highland Hills for a $7.5 million price tag.
And while those sales boosted the office sector in the first quarter, new construction projects are also expected to goose the activity here. It all adds up to an office market that, while not booming, has certainly been solid in the first half of 2019.
That’s the big takeaway from the first quarter Cleveland office report by Cushman & Wakefield|CRESCO. According to the report, drafted by lead author and broker David leb, the office market in the Cleveland area is a healthy one, and should remain this way throughout 2019.
If you’re interested in learning more about Cleveland’s office market – and activity in the region’s other commercial sectors – there’s still time to sign up for the Cleveland Commercial Real Estate Summit from Midwest Real Estate News and REjournals.com. The event, which will be held June 27 at Windows on the River, 2000 Sycamore St. in Cleveland, features the top names in Cleveland’s commercial real estate market, all sharing their expertise on current CRE activity and what the future might hold for the city and its suburbs.
As for the office market? Cushman & Wakefield in its first-quarter report said that the Northeast Ohio office market should continue to see modestly increasing rents, modestly decreasing vacancy rates and a tightening of the market until new office space is added to the area.
Cushman’s report does say that suburban markets will see less growth in rental rates, while rents should increase at a quicker pace in the CBD. Downtown, class-A office space and creative loft-style office space should be the top performers in the sector, Cushman & Wakefield reported.
Co-working should play a big role in the future of the office market in Northeast Ohio, with Cushman predicting an increase in co-working office space in the next two to four quarters. Small-scale co-working concepts have already proven successful in Northeast Ohio.
Two projects in particular are expected to add to the needed office supply in Cleveland’s CBD. Stark Enterprise’s NuCLEus project of 400,000 square feet and Harbor Bay’s Market Plaza development of 150,000 square feet are both expected to deliver in 2022.
How did the numbers look for the office sector in the first quarter? Pretty good. Cushman & Wakefield reported that the Cleveland market’s office vacancy rate dropped to 6.7 percent in the quarter, falling from 8.5 percent a year earlier. The average asking rent rose from $17.25 a square foot in the first quarter of 2018 to $17.59 a year later.
For even more insight on how all the commercial real estate sectors are performing in Cleveland, sign up for our 5th annual Cleveland Commercial Real Estate Summit here.